Deck 12: Strategic Performance Measurement

Question 1

Inspection Time is generally considered to be value-added time.

Answer 1

False

Question 2

The costs of lost sales arising from poor quality are always included in quality cost reports.

Answer 2

False

Question 3

A manager would generally like to see a trend indicating a decrease in setup time.

Answer 3

True

Question 4

If the manufacturing cycle efficiency is equal to 0.6, then 60% of the time a unit is in process is spent on activities that add value to the product.

Question 5

Throughput time is the amount of time required to move a completed unit from the factory floor to the warehouse.

Question 6

The most effective way to minimize quality costs while maintaining high quality is to avoid having quality problems in the first place. This is the reason for incurring appraisal costs.

Question 7

To minimize its total quality costs, a company should usually try to redistribute its quality costs more toward prevention and appraisal.

Question 8

A quality cost report is usually compiled by the purchasing department to show the added costs of purchasing higher quality components.

Question 9

If a strategy is not working, it should become evident on the balanced scorecard when some of the predicted effects don't occur.

Question 10

Queue time is considered non-value-added time.

Question 11

A balanced scorecard consists of a report showing a performance measure such as return on investment (ROI) or residual income for all of the divisions in a company that generate profits.

Question 12

Move time is considered non-value-added time.

Question 13

ISO 9000 standards were established to make sure that all consumer products incorporate specific safety features.

Question 14

A manufacturing cycle efficiency (MCE) ratio of less than 1.00 is desirable because this is the ratio of non-value-added time to throughput time.

Question 15

Quality is achieved when a product or service contains all of the features that a customer would expect, and when that product or service performs in such a way that the customer is satisfied.

Question 16

For management to be effective, it should focus on business processes, rather than functional departments, to serve the needs of its customers.

Question 17

External failure costs are limited to the costs of repairing defective products that are under warranty.

Question 18

A manufacturing cycle efficiency (MCE) of less than one is impossible.

Question 19

Quality of conformance refers to the extent to which a product offered by one company is similar to products offered by other companies.

Question 20

The balanced scorecard framework rejects the notion that improving process-oriented measures automatically leads to financial success.

Question 21

In essence, a balanced scorecard lays out a theory of how the company can take concrete actions to attain its desired outcomes. The strategy should seem plausible, but it should be regarded as only a theory.

Question 22

If the balanced scorecard is correctly constructed, the performance measures should be independent of each other so that bad performance on one measure will not result in bad performance on another performance measure.

Question 23

The performance measure which answers the question "Are we maintaining our ability to change and improve?" is:

A) internal business processes.
B) customer.
C) financial.
D) learning and growth.

Question 24

The balanced scorecard can only have four categories of performance measures.

Question 25

Financial measures such as return on investment (ROI) and residual income as well as operating measures may be included in a balanced scorecard.

Question 26

An increase in appraisal costs in a quality improvement program would usually have the following initial effects on internal and external failure costs:

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 27

Incentive compensation for employees, such as bonuses, should be tied to balanced scorecard performance measures regardless of how long the scorecard has been in place.

Question 28

The performance measures on a balanced scorecard tend to fall into four groups: financial measures, customer measures, internal business process measures, and learning and growth measures.

Question 29

A balanced scorecard contains both customer and internal business process performance measures because improvements in internal business process should result in improvements in customer satisfaction.

Question 30

An increase in appraisal costs will usually result in an increase in:

A) prevention costs.
B) internal failure costs.
C) external failure costs.
D) opportunity costs.

Question 31

Net profit margin percentage is an example of which performance measure category?

A) internal business processes.
B) customer.
C) financial.
D) learning and growth.

Question 32

Incentive compensation for employees, such as bonuses, should be tied to balanced scorecard performance measures only if managers are confident that the performance measures are easily manipulated by those being evaluated.

Question 33

Employee turnover percentage is an example of which performance measure category?

A) internal business processes.
B) customer.
C) financial.
D) learning and growth.

Question 34

Inspection of products would be classified as a(n):

A) prevention cost.
B) appraisal cost.
C) internal failure cost.
D) external failure cost.

Question 35

Financial measures tend to be lag indicators that report on the results of past actions.

Question 36

Financial measures such as return on investment (ROI) are generally better than nonfinancial measures of key success drivers such as customer satisfaction as leading indicators of future financial performance.

Question 37

Customer value propositions typically fall into three broad categories, which include all of the following except:

A) market share.
B) product leadership.
C) operational excellence.
D) customer intimacy.

Question 38

Delivery cycle time is an example of which performance measure category?

A) internal business processes.
B) customer.
C) financial.
D) learning and growth.

Question 39

Market share percentage is an example of which performance measure category?

A) internal business processes.
B) customer.
C) financial.
D) learning and growth.

Question 40

If improvement in a performance measure on a balanced scorecard should lead to improvement in another performance measure, but does not, then employees must work harder.

Question 41

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Test and inspection of in-process goods.
B) Technical support provided to suppliers.
C) Debugging software errors.
D) Audits of the effectiveness of the quality system.

Question 42

Which of the following would be classified as an external failure cost on a quality cost report?

A) Returns and allowances arising from quality problems.
B) Quality improvement projects.
C) Quality engineering.
D) Net cost of spoilage.

Question 43

Which of the following would be classified as an external failure cost on a quality cost report?

A) Repairs and replacements beyond the warranty period.
B) Technical support provided to suppliers.
C) Quality improvement projects.
D) Rework labor and overhead.

Question 44

Which of the following would be classified as a prevention cost on a quality cost report?

A) Net cost of spoilage.
B) Supervision of testing and inspection activities.
C) Liability arising from defective products.
D) Technical support provided to suppliers.

Question 45

In preparing a quality cost report, the cost of employee's time spent in quality circles is part of:

A) prevention costs.
B) appraisal costs.
C) internal failure costs.
D) external failure costs.

Question 46

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Final product testing and inspection.
B) Net cost of spoilage.
C) Repairs and replacements beyond the warranty period.
D) Rework labor and overhead.

Question 47

Which of the following would be classified as an external failure cost on a quality cost report?

A) Reentering data because of keying errors.
B) Customer returns arising from quality problems.
C) Test and inspection of in-process goods.
D) Rework labor and overhead.

Question 48

In classifying the costs of quality at a company that manufactures sonar equipment, which of the following is considered an external failure cost?

A) the net cost of scrap and spoilage incurred during production.
B) the cost of repairs and replacements made during the warranty period.
C) the cost of debugging software errors found in the sonar equipment during inspection at the plant.
D) both the cost of repairs and replacements made during the warranty period and the cost of debugging software errors found in the sonar equipment during inspection at the plant.
E) none of the above.

Question 49

Which of the following would be classified as a prevention cost on a quality cost report?

A) Debugging software errors.
B) Quality training.
C) Test and inspection of incoming materials.
D) Cost of field servicing and handling complaints.

Question 50

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Quality improvement projects.
B) Supplies used in testing and inspection.
C) Audits of the effectiveness of the quality system.
D) Quality data gathering, analysis, and reporting.

Question 51

The cost of testing incoming materials received from suppliers would be classified as a(n):

A) prevention cost.
B) appraisal cost.
C) internal failure cost.
D) external failure cost.

Question 52

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Quality improvement projects.
B) Supervision of testing and inspection activities.
C) Debugging software errors.
D) Warranty repairs and replacements.

Question 53

The cost of labor time required to rework defective units would be classified as a(n):

A) prevention cost.
B) appraisal cost.
C) internal failure cost.
D) external failure cost.

Question 54

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Returns and allowances arising from quality problems.
B) Downtime caused by quality problems.
C) Test and inspection of in-process goods.
D) Cost of field servicing and handling complaints.

Question 55

Which of the following would be classified as a prevention cost on a quality cost report?

A) Cost of field servicing and handling complaints.
B) Warranty repairs and replacements.
C) Systems development.
D) Rework labor and overhead.

Question 56

The cost of quality training would be classified as a(n):

A) prevention cost.
B) appraisal cost.
C) internal failure cost.
D) external failure cost.

Question 57

The four categories of quality costs in a quality cost report are:

A) external failure, product liability, prevention, and carrying.
B) external failure, internal failure, prevention, and appraisal.
C) warranty, product liability, prevention, and appraisal.
D) warranty, product liability, training, and appraisal.

Question 58

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Audits of the effectiveness of the quality system.
B) Systems development.
C) Quality improvement projects.
D) Debugging software errors.

Question 59

Which of the following would be classified as a prevention cost on a quality cost report?

A) Technical support provided to suppliers.
B) Net cost of spoilage.
C) Disposal of defective products.
D) Debugging software errors.

Question 60

Which of the following would be classified as an external failure cost on a quality cost report?

A) Final product testing and inspection.
B) Disposal of defective products.
C) Supervision of testing and inspection activities.
D) Cost of field servicing and handling complaints.

Question 61

Which of the following would be classified as a prevention cost on a quality cost report?

A) Disposal of defective products.
B) Net cost of spoilage.
C) Depreciation of test equipment.
D) Technical support provided to suppliers.

Question 62

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Final product testing and inspection.
B) Warranty repairs and replacements.
C) Depreciation of test equipment.
D) Debugging software errors.

Question 63

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Rework labor and overhead.
B) Cost of field servicing and handling complaints.
C) Technical support provided to suppliers.
D) Lost sales arising from a reputation for poor quality.

Question 64

Eaglin Company's quality cost report is to be based on the following data: What would be the total appraisal cost appearing on the quality cost report?

A) $194,000
B) $175,000
C) $112,000
D) $167,000

Question 65

Which of the following would be classified as an external failure cost on a quality cost report?

A) Re-entering data because of keying errors.
B) Repairs and replacements beyond the warranty period.
C) Disposal of defective products.
D) Technical support provided to suppliers.

Question 66

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Maintenance of test equipment.
B) Re-entering data because of keying errors.
C) Debugging software errors.
D) Warranty repairs and replacements.

Question 67

Circle K Toys, Incorporated manufactures toys and children's clothing and sells these products to retail outlets. The following costs were incurred in performing quality activities at Circle K during the year: What is the total of the internal failure costs for Circle K?

A) $53,000
B) $99,000
C) $517,000
D) $38,000

Question 68

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Debugging software errors.
B) Supplies used in testing and inspection.
C) Re-entering data because of keying errors.
D) Warranty repairs and replacements.

Question 69

Which of the following would be classified as an external failure cost on a quality cost report?

A) Depreciation of test equipment.
B) Test and inspection of in-process goods.
C) Test and inspection of incoming materials.
D) Warranty repairs and replacements.

Question 70

Eaglin Company's quality cost report is to be based on the following data: What would be the total internal failure cost appearing on the quality cost report?

A) $119,000
B) $149,000
C) $156,000
D) $140,000

Question 71

Adolphson Corporation has provided the following summary of its quality cost report for the last two years: On the basis of this report, which one of the following statements is most likely correct?

A) An increase in prevention and appraisal costs resulted in fewer defects, and therefore, resulted in a decrease in internal and external failure costs.
B) A decrease in internal and external failure costs resulted in less need for prevention and appraisal costs.
C) Quality costs such as scrap and rework decreased by 48%.
D) Quality costs such as returns and repairs under warranty decreased by 40%.

Question 72

Which of the following would be classified as a prevention cost on a quality cost report?

A) Supplies used in testing and inspection.
B) Debugging software errors.
C) Quality improvement projects.
D) Lost sales arising from a reputation for poor quality.

Question 73

Fackler Company's quality cost report is to be based on the following data: What would be the total external failure cost appearing on the quality cost report?

A) $57,000
B) $62,000
C) $205,000
D) $424,000

Question 74

Eaglin Company's quality cost report is to be based on the following data: What would be the total prevention cost appearing on the quality cost report?

A) $55,000
B) $30,000
C) $62,000
D) $133,000

Question 75

Fackler Company's quality cost report is to be based on the following data: What would be the total appraisal cost appearing on the quality cost report?

A) $130,000
B) $152,000
C) $146,000
D) $219,000

Question 76

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Rework labor and overhead.
B) Technical support provided to suppliers.
C) Quality improvement projects.
D) Systems development.

Question 77

Which of the following would be classified as an external failure cost on a quality cost report?

A) Depreciation of test equipment.
B) Repairs and replacements beyond the warranty period.
C) Supplies used in testing and inspection.
D) Re-entering data because of keying errors.

Question 78

Fackler Company's quality cost report is to be based on the following data: What would be the total prevention cost appearing on the quality cost report?

A) $99,000
B) $67,000
C) $120,000
D) $79,000

Question 79

Fackler Company's quality cost report is to be based on the following data: What would be the total internal failure cost appearing on the quality cost report?

A) $143,000
B) $146,000
C) $97,000
D) $43,000

Question 80

Circle K Toys, Incorporated manufactures toys and children's clothing and sells these products to retail outlets. The following costs were incurred in performing quality activities at Circle K during the year: What is the total of the prevention costs for Circle K?

A) $394,000
B) $409,000
C) $455,000
D) $470,000